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Third Party Funders in Arbitration
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Att. Leyla Orak Celikboya
Third party financing or third party funding may be defined as the
financing of arbitration costs of one of the parties by a third person
who is not related to the claim
1
. It may also be defined as “
any person
or entity that is contributing funds, or other material support, to the
prosecution or defence of the case and that has a direct economic
interest in, or a duty to indemnify a party for, the award to be rendered
in the arbitration
”
2
.
The methods by which third party funders agree to finance litiga-
tion costs of a party vary
3
: The consideration of the third party funder
may be the gain of an agreed upon percentage of an awarded proceed,
a fixed success fee, or a mechanism combining the two. Funding may
result in the issuance of equity or debt instruments, the transfer of a
claim to the funder, or the funder gaining control over the party, and,
consequently, of the dispute strategy and management. The clients of
funders vary: they may be the claimants or the respondents, law firms,
individuals, and even states.
Third party financing is relatively new in international arbitration,
and its pros and cons are subject to numerous discussions. This article
aims to refer to key concerns and touches upon the instruments regu-
lating this funding.
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NEWSLETTER 2015
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Article of September 2015
1
See
Burcu Osmanoğlu
, Third Party Funding in International Commercial Arbitration and
Arbitrator Conflict of Interest, (2015) 32 J. Int. Arb. 3, Kluwer Law International, p. 325; as
defined by Yves Derains.
This article provides useful insight and detailed explanations on the forms of third party
funding, and focuses on its assessment from a conflict of interest point of view.
2
See IBA Guidelines on Conflict of Interest, Explanation to General Standard 6, para. (b),
p. 14, 15.
3
Osmanoğlu
, p. 330, 331.